Russia, EU both welcome WTO ruling on Third Energy Package dispute

Gazprom says it is satisfied with a World Trade Organization (WTO) ruling on Russia’s challenge to Europe’s Third Energy Package, which limits the Russian gas giant’s access to the European energy market.

The trade dispute was initiated by Russia in April 2014, challenging European rules that it deemed discriminatory against Gazprom. The WTO agreed with some of Russia’s arguments while dismissing others, according to the ruling published by the organization on Friday.

One thing that Russia scores a win on is the regulation of the OPAL pipeline, which allows Gazprom to use only 50 percent of its total capacity to transport its product, unless it agrees to supply a certain amount a year at a lower price. OPAL is located in Germany and is a key element for transportation of natural gas directly from Russia through the Nord Stream pipeline and its future expansion, the Nord Stream 2. The use of the pipeline, which is co-owned by Wintershall and Gazprom, has been the subject of several legal battles.

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The European Commission argued that the cap was meant to protect the Czech gas market, through which OPAL passes, from being exposed to Gazprom’s dominant position, but did not serve as a restriction to the flow of the fuel from Russia in principle.

But the panel appointed by the WTO’s Dispute Settlement Body agreed with Russia’s arguments and concluded that the “the design, architecture and revealing structure of the two challenged OPAL conditions restrict market access for EU imports of natural gas from Russia and limit competitive opportunities for the importation of Russian natural gas into the European Union.”

If accepted by the European Commission and translated into a change of the energy rules, the decision would mean that the use of OPAL by Russia will no longer be threatened by the possibility that the EU would withdraw a special exemption, which currently allows Gazprom to transport more gas through the German pipeline that it would normally be allowed.

The other part of the ruling in Russia’s favor relates to certification legislation for third-country energy products in place in several EU countries, including Croatia, Hungary and Lithuania. The WTO panel agreed that they were inconsistent with free trade rules. The same conclusion was made for the so-called TEN-E Guidelines on transportation networks, which encouraged a development that would reduce Russia’s share on the European market in favor of other suppliers.

The European Commission too welcomed the WTO ruling, saying it confirmed “lawfulness of core principles of the EU third energy package” rejecting Russia’s other arguments that claimed the regulations were discriminatory in nature.

Gazprom said it hoped the European Commission would now act to eliminate the violations of free trade rules confirmed by the WTO. The commission said it will analyze the ruling in detail, “in particular as regards a limited number of issues on which the WTO-compatibility of EU energy policy has still not been recognized.”

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